Document Type
Article
Publication Date
12-1-2005
Abstract
In this study I investigate the relationships between oil company competitors as they collaborate to develop mutually owned oil-field projects. Using fundamental theoretical principles derived from Transaction Cost Theory and Property Rights Theory\, I have analyzed fourteen interviews with oil company leaders in an attempt to better explain partnership behavior. The typical oil-field partnership governance model (the Joint Operating Agreement – or JOA) is designed to minimize transaction costs and equitably distribute profit in accordance with Transaction Cost Theory. Property Rights Theory\, however\, more accurately describes JOA partner behavior by accounting for residual rights of control\, which are a more dependable predictor of partner investment behavior than equity ownership. While residual rights help frame partner investment behavior within Joint Ventures\, the JOA is unique\, in that it establishes an unusual situation whereby residual rights are decoupled from ownership. In the case of residual rights decoupling within competitor partnerships\, resulting power asymmetries prompt investment behavior not predicted by modern Property Rights Theory. Thus\, the JOA presents an environment that highlights a gap in our understanding of residual rights of control. In fact\, from this investigation\, I find that residual rights decoupling within competitor partnerships initiates partner investment behavior counter to that predicted by classical Property Rights Theory. Under these circumstances\, partners with less residual control invest as much or more in the Joint Venture than partners with more residual control. Thus\, residual rights of control are not necessarily an incentive for investment.,Doctorate of Management Programs
Keywords
Oil industries--Management, Industrial relations
Rights
© The Author(s). Kelvin Smith Library provides access for non-commercial, personal, or research use only. All other use, including but not limited to commercial or scholarly reproductions, redistribution, publication or transmission, whether by electronic means or otherwise, without prior written permission is strictly prohibited.
Department/Center
Design & Innovation
Recommended Citation
Sharma, Arun K., "Collaboration Between Competitive Firms in the Upstream Oil Industry: The Effect of Operational Control on Valve Creation" (2005). Student Scholarship. 629.
https://commons.case.edu/studentworks/629